‘CBN’s forex restriction made us establish our own rice mill’

Advancing agriculture in Nigeria beyond the perception of a poverty alleviation scheme, to a fully fledged business is increasingly gaining traction as more people get involved in the value chain. Tunji Owoeye, group managing director, Elephant Group Plc, who is also Chairman, Rice Investors Group of Nigeria, has spent over three decades in agribusiness and in this interview with Caleb Ojewale, addresses some of the pertinent issues for rapid agricultural development.

Agriculture is once again taking the centre stage as government appears to be focusing on it. In your own experience, what are the things we need to do differently, to ensure that this time; agriculture is developed, and delivers the financial gains that we aspire for as a nation.
We think as a company that first of all, we need to leverage on the modest gains of the past few years by ensuring that there is consistency in polices relating to agriculture and agribusiness in the country. We’ve seen some good signs of that in some of the polices contained in the roadmap that government brought out, it is just to develop on those roadmaps and in clear terms, look at specific channels and strategies to ensuring that those aspirations are actually achieved.
And we can pick that from product to product, value chain to value chain. I think we are not lost in where we want to grow. What we need is to look out for consistent growth and strengthening our delivery in terms of the mechanism we want to achieve these objectives. I think that is the most important thing we need to do in ensuring that we make agriculture profitable, and then we develop on it.

Talking about these polices, which ones can you highlight as either needing to be sustained or modified?

Most of the policies around input, production, processing are actually the policy thrusts we are looking at here. For instance in the input sector, there are initiatives of ensuring that we have soil specific and product specific fertiliser inputs delivered for farmers. These are policies that are very good for increasing yields of farmers per hectare. Looking at it, if all these applications are in effect there will be consistent growth in the production of different products.
Take for instance the Presidential fertilizer initiative where raw materials of phosphate are brought from Morocco to Nigeria. Yes, it works well for products like 20:10:10 input, but we need to look at other specific initiatives that will be helpful for other soil types.
We need to look at what is best for rice, maize, sorghum etc as well as for different soil types, and different regions in the country.
We have done a pilot scheme for a fertiliser specific programme and by the time we start moving from product specific to soil specific, it will improve the overall production capacity in Nigeria.
We also have to look at increasing extension services across the country. The agric extension officers are not as much as they used to be, but, if we can get some of the old hands, they can help train state extension service officers. With this, they can be able to complement what some of the input suppliers are doing in terms of getting farmers enlightened on what will work well on their farms. All of these will contribute to ramping up production.

To rice which has dominated the news cycle for a while because we supposedly spend a lot of money on (importing) it, we seem determined to completely stop its importation. You have been a key player in that value chain, so what is your own assessment of where we are today in rice production and what do you think we need to do in order to achieve more, and totally become rice sufficient if that is possible?

First of all, we have one “bad habit” in this country. We only criticise, look at bad things, and we don’t look at the positive side of things. When somebody is doing something good, we also have to commend that.
A good example, when the 41 exclusion list came out, most people in industry felt; how are we going to survive? But at the end of the day, we see that whatever CBN had done is a vision that is beginning to yield results today. Because, if those 41 items had not been excluded, a lot of entities probably wouldn’t have taken vertical and backward integration very seriously, but now it is yielding a lot of results.
It is very interesting how a lot of people were knocking CBN, and condemning the ban of forex provision for some items’ importation, but the same people are now praising them. What I have learnt from that is, when you believe in something that is useful, and in the interest of all, you stick to it. Which is what the CBN has done, and in the end, it is a plus for everybody. Initially it was about helping to manage the country’s foreign reserves, but today it has achieved much more than that as we can see it is helping in growing the economy by increasing employment.
Bringing it to rice, what has happened is that there has been a strong will that government made it known that importation is no longer sustainable. So companies were expected to look inwards and begin to produce. The good thing is that we have the assets in terms of land mass, and government did not end at only restricting importation but also provided support by creating an enabling environment to produce.
If you Google the Anchor Borrowers’ Programme, it is beginning to gain momentum across Africa. If support for rice production across the value chain is sustained, I can tell you it is a model that will be copied across Africa because it is already succeeding.

Narrowing this down to elephant group as an organisation, what has been you own role in rice. You used to head the importers association but now chair the rice investors group, which means you have had to adopt backward integration. So, what role are you playing in the value chain; milling, cultivating, or what?
First, there was a political will and since we’ve seen that as well as some of the initiatives of government in ensuring it happens, we have also been able to play in that space in backward integration. Right now, we have our own mill but if the 41 items exclusion did not occur, I wouldn’t have seen us getting started at the time we did. Now we have our own mill and some leased mills.
But, if that political will had not been there, we would also still be saying; someday in the future. Today, we are also happy to say we are part of that programme by investing in the milling value chain and also working with farmers in ensuring that they produce paddy.

What is the capacity of your mill and where is it located?
We have a capacity of about 60,000 metric tonnes per annum, and it is located in Rivers state. The volume of paddy produced by farmers is increasing every year now and they are sure of a ready market. In another three to four years, we should feeding the whole of West Africa

Funding remains a nagging issue for agricultural development in Nigeria. High interest rates and even general difficulty in access to funds are common themes. How do you think we can effectively address this issue?
Principally, what has been discouraging lenders is risk and how to mitigate it. And that is why we have the likes of NIRSAL coming in. The more of risk mitigants that we can institute in the value chain, the better it will be for agribusiness. What NIRSAL is doing can be expanded to support a wide spectrum and taking on more risks. We can also have more organisations sharing the risks with banks and with the value chain. When risks are shared and the industry is de-risked, it gives lenders the confidence to increase their appetite for that industry.
We also need to look for long term funding for long term commitments or projects. Part of long term funding includes entities in agribusiness looking at opportunities in long term capital. We need to start seeing agric companies going to the stock exchange and that is very vital, because we are talking about food security. We need to have situations where the Nigerian stock exchange will attract agribusiness companies and value chain operators, so we need to look at some of the incentives that will bring them.
If you can access funds for oil and other sectors of the economy, agriculture also has to be seen as priority because it is critical. It needs a framework to ensure we are attracting the right and serious mix of operators into the market so that they can access long term capital, to be able to meet some of their medium and long term aspirations. That, I think is critical. The government has a role; NSE has a role, likewise, SEC and operators themselves.

What are your thoughts on making agriculture in Nigeria attractive to private equity and venture capital investors?
It is dependent on how the businesses are packaged. Prospective partners will be looking at so many factors, and a lot is dependent on presentation, governance, and even the level of independence they meet in the company.
For the company to be attractive to a lender or investor that is coming in, they want to see that the books are decent, has growth potentials and is consistent.

Also related to finance, I am curios to find out; what has been your experience with agric insurance as a stakeholder in the sector?
Other than the intervention of NIRSAL in terms of risk sharing, agric insurance has unfortunately not been very impactful in this environment and this is one of the things we must encourage. I know that some international lenders, when they look at books of companies, sometimes they can deploy insurance products to leverage on the credit. These are international products that are not very popular in Nigeria.
The moment you have insurance, it gives assurance to the lender and increases capacity or appetite to get into the transaction. It is something that must be encouraged.

One of the topical issues in Nigeria’s agriculture is that of aging farmers. We have been trying to make agriculture appealing to young people, to solve unemployment and as well build capacity to increase productivity. What do you think needs to be done in order to get more young people involved?
Don’t forget that the young people you’re talking about are increasingly getting exposed, enlightened and know what they want. What drives a lot of young people is; what is in it for them? If you are going to discourage or attract someone from for instance, taking bank job and being an entrepreneur in agribusiness, he/she will have to look at the basic numbers. If I’m going to do this, how well am I going to do in one to five years? How am I going to do in the medium to long term? If you can prove to this young man or woman that at the end of the day, they’ll probably be better, then they’ll take it up, because it is all about considerations and interest.
We need to work out strategies that will make it attractive to young people. There is a whole value chain; production, logistics, processing, marketing, packaging, etc so our young people could fit into one of this value chain and take advantage of opportunities there. But, the most difficult to us that have been in the industry for decades is production. They would think; with primitive equipment, how much can I make? But by the time we start to introduce mechanised operations into it and you see a young educated farmer as seen in the US, Brazil, or Europe, having hectares of farmland, and controlling less than 10 people and producing so much with about three equipment. This will begin to attract other people that, hey, this guy is successful at this, I also want to try it. So, we need to encourage more mechanisation in farming so as to attract the younger people. We need to attract them with incentives like tax rebates, and encouraging even the older ones into areas they can get cheaper capital.
The young people need to start seeing agriculture as a business, and not as an intervention, with this, more young people will get involved.
You cannot close the door against the smallholder farmers, that will still be, and is still found across the world, but we need to have dominance of mechanised farming which will increase efficiencies and output. It also gives opportunities for them to start considering exports as a means of disposal.

Elephant group is involved in input supplies, including seeds and fertiliser, has there been any marked increase in the company’s revenue to match growing interests in agriculture?

I think we have to look at this from the complete macroeconomic situation of the country. You will agree with me that we’re just trying to get out of recession, and whether there is so much talk about something or not, there are fundamental issues that we’ve been going through in the last two to three years. I think it may not be a time to do serious assessment of what impact has been made because of the fundamental recession issues that everyone has gone through. Other than that, I think the future is brighter because as more awareness is created, and more acreage of land is cultivated, there will be need for more inputs to service the increase in land cultivation. This represents a clear cut opportunity. We were talking earlier about soil specific fertilisers. These are fresh opportunities that more agribusiness companies will take advantage of.

Do you think Nigerian farmers are using enough fertilisers?
Not at all. We are using one of the lowest in the world, and it is not because farmers don’t want to use, but because of pricing. And this one of the problems the Presidential Fertiliser Initiative is meant to address. At the end, we need to create efficiencies in cost of local fertiliser production so as to bring prices down. When farmers get fertilisers at reduced prices, they can buy more to improve yield from their farmland.

Are there other insights you’d like to provide on how agribusiness in Nigeria can be advanced?
If I had the opportunity to be a policy maker, with experience from over three decades in agribusiness, I will ensure that local investors in the value chains are protected, encouraged, and supported. That is key in achieving the growth we desire, and doing this will also attract other people to come into the sector.
Given the opportunity, I will also push for a review of the ECOWAS treaty. The reason for that is this; Nigeria is seen as a big brother in West Africa, and as such, the country has been turned into a dumpsite. One can’t continue to be a big brother for the kid brothers to continue making a mess of him. We need to able to protect local investors. Rice and a lot of other commodities are dumped in neighbouring countries and then find their way into Nigeria.
In the ECOWAS treaty, we should ensure that anything not produced in a member country, should not be imported with the intension of dumping elsewhere; particularly in Nigeria.
A lot of people castigate the Customs service for not doing much, but what is perhaps unknown is that they lose a lot of men on a daily basis. But instead of having to fight with gun, we should fight with policy, and this will make their work easier.
We also have to resuscitate commodity boards. This will protect the farmers, and ensure stability of prices. Furthermore, just as we have one year compulsory NYSC, we can have some of these young people going to the agric sector for the mandatory service year. In the end, it will boost food production, human capacity and we will as well have more young people economically empowered.